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Lack of economic plans in 100 days of new govt keep stocks bearish
Summary

The KSE-100 Index failed to move up as the new PTI government completes its 100 days in office this week. The PTI government came into power in August when the KSE-100 Index was 42,638, in August 2018. The market was 40,894 in November this week when the government completed its 100 days. The damage done to the economy by the previous government, the lack of experience of running the government and no clear focus on economy kept efforts of the government divided in different directions. The economy remained unaddressed with formulation of a comprehensive economic plan during the first 100 days of the present government.

During the week KSE-100 Index shed 373 points to close on Friday at 40,496. The average volume declined by 3% to 152 million shares. The market capitalization decreased to Rs.8,067 trillion.

On Monday the KSE-100 Index lost 98 points to close at 40,771.55. The market was volatile with Index going up in intraday high of 275 points. The week started with investors looking for clarity regarding financial assistance from friendly countries, possibility of rate hike in the incoming monetary policy this week and guessing for the harsh IMF conditionalities. The shares of banking sector were up on expectation of rate hike. It was also a rollover week.

Tuesday also saw choppy trading with gaining 187 points in early trading. It lost 189 points and closed at 40,704.80. The volume too declined to 132 million shares. There was selling pressure in exploration & production and fertilizer shares, which took away 45 points from the index.

Due to wide fluctuation on Wednesday in rupee valuation, which touched all-time high of Rs.144, the KSE-100 Index lost 142.80 points to close at 40,496.03. The volume too decrease to 124 million from 132 million a day earlier.

On Thursday, the stock broke the losing trend in the market and gained 122.67 points to close at 40,984.22. The foreigners kept selling during the week with $3.88m on the day. The banking sector kept climbing and added 106 points to the index. As a result of hike in international oil prices shares of POL, OGDC and PPL gained value.

The last day of trading, Friday, was marked by foreign selling to the tune of $32.64m. It seems to be outcome of MSCI semi-annual review. Foreign corporate sold $34.30 of shares while local investors buying $1.62m of shares. Also on Friday the rupee in open market touched as high as Rs.144 against the dollar which settled to 138. The inter-bank rate was Rs.140.36 per US dollar. As a weaker rupee the KSE-100 Index shed 142.80 points to close at 40,496.03. The market volume jumped to 271 million from 97 million on Thursday.

 

Participants/Activity

On average shares of 360 companies were traded. Of these 124 were gainers and 211 were losers and 25 remained unchanged.

Foreigners were net seller of $51.13m shares during the week; companies were buyer by $2.61m, Banks were buyer $2.35m; Mutual fund net buyer $12.31m and individuals net buyers $6.43m.

Volume leaders during the week were: UBL XD 59m; Lottee Chemical XD 37m; Bank of Punjab 35m; Pak Elektron 31m; Fauji Cement 25m; Power Cement 14m; K-Electric and Siddiqe Son Tin 13m each; TRG Pak Ltd 12m; Engro Polymer & Lucky Cement 11m each, Descon Oxychem 9m and Nishat Chunian XD 3m.

Triggers
  • Pak Suzuki to set up second plant at Port Qasim which will give additional 100,000 vehicle per year.
  • Imran Khan directs the Commerce Division to finalize three policy documents vis-à-vis: i) Trade Policy ii) National Tariff Policy and iii) Trade related Investment framework for approval of the cabinet latest by end of December.
  • Pepsi Cola to invest $1.2 billion according to reports.
  • Prime Minister directed two non-members of the Economic Advisory Council – Jahangir Khan Tareen, Mr. Arif (friend of Mr. Imran Khan from private sector) and Dr. Ashafaque Hassan Khan to prepare Plan-B economic stabilization program to deal with the multiple crises facing the economy. Plan B will be without seeking an IMF program and should be prepared before Christmas.
Conclusion

The Prime Minister seems to release the absence of a comprehensive economic plan with or without IMF package. He, therefore, ordered Plan B to be prepared, which shall give an alternative to IMF package. Once the economic plan is agreed and adopted by the government there will be clarity in the stock market for investors opening doors for positive movements.

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